FMCGs wait for out-of-home consumption to pick up

NEW DELHI: Out-of-home consumption continues to be in limbo for fast moving consumer goods companies. With small shops -- kiosks and panwallahs -- still shut in several cities, and school and colleges closed for longer periods, impulse purchase and on-the-go categories such as chocolates, ice-creams, cold beverages, small packs of chips and candies will take some time to rebound.

In India, out-of-home consumption for some categories is 30-50%.

“About 30-40% of small shops still remain shut in some cities—these are typically shops that sell candies, cigarettes, small packs of chips and beverages. The demand for impulse categories will only come back to pre-covid levels once such shops resume business,” Subhashis Basu, chief operating officer at Indore-based Prataap Snacks said.

The company, that sells the popular Yellow Diamond brand of chips, recorded 80-85% of pre-covid sales in June. "A large part of this is channel filing after a gap of nearly three months that has seen an uptick in demand," Basu added.

The company's small packs of consumables, priced at of ₹5 and ₹10, typically clock robust sales through small shops and are linked to impulse purchases or consumed out of home. However, in-home-consumption of its ₹20 and above price packs has also picked up.

While India has been unlocking its economy, its schools and colleges remain shut and several offices continue to work under restrictions or have employees working from home.

Travel, an important sales channel, remains under restrictions and bars and pubs are also shut.

For beverage maker Parle Agro that sells Frooti and Appy Fizz while on-the-go consumption saw a significant drop in the months of the lockdown, the company expects the trend to continue into July.

Nadia Chauhan, joint managing director and CMO, Parle Agro, said despite the easing of curbs in June, consumers have remained cautious. "Indicators imply there is a strong possibility of this trend continuing into July, thereby seeing a continued impact on impulse categories,” she said.

The company is now back to 60% of pre-covid retail coverage. "During the lockdown, we drove an aggressive strategy with our e-commerce partners which resulted in us gaining large market share on these platforms for our categories, especially for Frooti," said Chauhan.

For candy and confectionery maker Perfetti Van Melle also, April-May was bad although things are getting back on track as the country 'unlocked' in June.

“Due to the lockdown, the footfalls on the streets have been adversely impacted, and this has a direct bearing on the out-of-home consumption, especially for impulse categories. It is difficult to put a number to this, but during the lockdown period of end March-end to May, many of the smaller shops and kiosks selling impulse categories were closed,” Rajesh Ramakrishnan, managing director, Perfetti Van Melle India--maker of Alpenliebe candy--said.

The impact was more pronounced in urban markets than those in rural areas, Ramakrishnan said.

Companies have quickly moved to fulfill demand for in-home pack sizes or family packs as consumption of snacks, chocolates and beverages moves inside homes.

“One of our strategic intent has been to drive in-home stocking and in-home consumption. This is reflected in the launch of several large pack sizes across brands like Alpenliebe Juzt Jelly, Alpenliebe, Chupa Chups and so on," Ramakrishnan said.

Earlier this week, chocolate and cookie company Mondelez entered the packaged cake market as it expects a surge in in-home consumption.

For Mondelez too consumption of chocolates, an impulse category and consumed while on-the-go, has shifted in-home. The company moved to increase sales online by using its own e-commerce portal that was launched to fulfill large gift pack orders, and allowing regular consumers to order its chocolates and cookies at home.

“In-home snacking has come to take precedence as part of the ritual of spending more time with family or with oneself…homebound consumers are now increasingly looking at ways to indulge in or create at home moments.”

The company is leveraging all existing channels, and has configured some of the direct to consumer routes and strategic partnerships during this period, said a spokesperson at the company that makes Oreo cookies and Tang drinks.